Fed: 25 bps (priced in). Will the Fed send a strong message? Fed funds futures still pricing a pivot.

Core PCE for December has continued to moderate, printing at 4.4% y/y. This is down from 4.7% y/y in November. The series has charted a lower peak (LP) followed by a lower trough (LT). This is a downtrend. Its momentum is defined by the green down-sloping trend line.

Advance GDP for Q4 printed at 2.9% q/q. This is lower than the previous 3.2% for Q3, but higher than the forecast of 2.6% q/q. Durable goods came in at 5.6% m/m - much higher than the expected 2.4% m/m. However, the data is hiding weakness. Consumer spending was lower than expected at 2.1% (2.9% - forecast), and there is a noticeable buildup in inventories. Given the weaker consumption, the…

Two series released yesterday came in weaker than expected. This raises the fear that the US is already in recession.

Following yesterday's CPI print, showing the slowest inflation in over a year, we consider the US 10-Yr real rate (top chart). December into January, price action resembles a flag (green parallel lines). This is a continuation pattern. The measured move suggests that real rates have a bias to decline.

Headline CPI printed at 6.5% y/y and core inflation came in at 5.7%. Core CPI was 0.3% m/m, which equates to 3.7% y/y, but the series is moving in the right direction. The market is now pricing in a much less aggressive 25bps hike by the Fed for 1 Feb. The shelter index showed an acceleration, coming in at 0.8% m/m, higher than November’s 0.6% m/m. However, with the housing…

The commodity made a strong start to the week on China and Fed optimism, but now faces difficulties, as the World Bank expects global growth to decelerate sharply this year

The latest Personal Consumer Expenditures (PCE) figures came out today and showed that inflation continued to moderate in November

The German index comes from its worst week since September, as the European Central Bank delivered a hawkish message, expecting more rate hikes ahead and steep economic slowdown

Inflation is moderating, yet the Fed remains aggressive in policy. We attribute a reason for this to the tight labour market.

Last week’s dot plots suggest rates will move higher, with the terminal rate adjusted upwards from 4.6% to 5.10%. The Fed chair’s tone during the media conference was hawkish. Risk markets were less than impressed. They sold off heavily for the rest of the week. The market thinks that Fed policy is too aggressive.